Washington Legal Foundation Media Briefing; The October 2010 Term: U.S. Supreme Court Wrap-Up

Monday, September 12, 2011 - 09:23

Featured Speakers: The Honorable Dick Thornburgh, K&L Gates LLP and Chairman of the Legal Policy Advisory Board of the Washington Legal Foundation; Peter D. Keisler, Partner, Sidley Austin LLP; Patricia Ann Millett, Partner, Akin Gump Strauss Hauer & Feld LLP and Richard A. Samp, Chief Counsel, Washington Legal Foundation.

Thornburgh: We shall discuss the general tone and tenor of the Court's October 2010 term.

Keisler: There is an emerging debate regarding this term's general tenor - whether the Court is "pro-business" and to what extent its decisions shed light on that perspective. While the justices do not inherently favor any particular interest, it is worthwhile to ponder what interpretative principles may be imbedded in the Court's view of facts or the law - particularly since there has been some disagreement with lower courts.

The business community welcomed the Court's rulings in Wal-Mart v. Dukes on class action, AEP v. Connecticut on global warming and Brown v. EMA on violent video games. Yet, as amicus and plaintiff, the Chamber of Commerce lost in the controversial Chamber of Commerce v. Whiting case, which will be discussed later.

Except Wal-Mart, business lost every employment discrimination or retaliation case, including Kasten v. Saint-Gobain , Staub v. Proctor Hospital and Thompson v. North American Stainless. In each, the lower courts had divided on the legal issue, and the Court ruled in favor of the employee. Regarding securities law, in Matrixx Initiatives, Inc. v. Siracusano, business unsuccessfully sought to tighten the definition of materiality to include a statistical significance test under SEC Rule 10b-5, and in Erica P. John Fund, Inc. v. Halliburton Co., the Court reversed the Fifth Circuit's pro-business holding that loss causation should be considered at the class certification stage.

In Williamson v. Mazda Motor of America, Mazda unanimously lost its claim that a products liability case in California was preempted by federal law. In FCC v. AT&T, the Court unanimously reversed the Third Circuit and disallowed AT&T's claim that corporate privacy is protected by the Freedom of Information Act (FOIA).

I had the privilege of representing the petitioners/defendants in AEP v. Connecticut, in which the Court held that, as matters of law or policy, federal district court judges should not decide litigation over how we as a nation address global warming. The core of the decision was the holding that the Clean Air Act ousted common law judicial authority. Importantly, the Court had to resolve a three-way disagreement: the petitioners and the U.S. government - which both supported dismissal - and state government on the other side.

We argued that enactment of the Clean Air Act was sufficient to displace federal common law, and the plaintiffs said common law authority survives until the EPA adopts regulations limiting greenhouse gas emissions. The U.S. government argued in the middle: that it was unnecessary for the EPA to adopt the precise remedy that the plaintiffs sought but that the EPA's movement in this direction is pertinent. The Court unanimously adopted the first view, narrowing the authority of federal common law to address social and economic problems.

AT &T Mobility v. Concepcion involved the arbitration agreement included in all AT&T cell phone contracts. In lower courts, California's conscionability doctrine was invoked to void AT&T consumer contracts, which precluded class action arbitration in favor of individual arbitration. The Court reversed and held that the Federal Arbitration Act preempts the common law conscionability doctrine.

Millett: I will discuss two constitutional principles whose treatment this term had particular impact on business: preemption and free speech. There was some real solidification of views this term on preemption. In AT&T, for example, the plaintiff thought that he was getting a free cell phone until he received a bill for $30, and the adhesion contract barred class action arbitration. The California Discovery Bank rule provides that if you have contracts of adhesion in small dispute cases presenting unequal bargaining power, then courts will disfavor contractual waiver of class-wide actions. While the arbitration agreement should be enforced under the Federal Arbitration Act, California won't enforce it unless the plaintiff can pursue class action arbitration. Justice Thomas grudgingly voted with the 5-4 majority but expressed his opinion that it is Congress's job to preempt.

There was one unanimous preemption case: Williamson v. Mazda Motor, regarding minivans and center seat shoulder belts. Some manufacturers chose not to install them, and a consumer sued under product liability theory. The Court's 2002 decision in Geier v. American Honda Motor Company created a preemption analysis for the Federal Motor Vehicle Safety Standard Act of 1966. Applying that analysis, the Court in Williamson reversed, holding that since seatbelt choice was not a significant objective of the federal regulation, the manufacturer was free to experiment.

Another high-profile preemption case, Chamber of Commerce v. Whiting , involved the Arizona immigration law providing that a business can lose its license if it intentionally hires illegal aliens and further mandating the use of the experimental federal E-Verify system. Arizona thought the federal statute provided too little protection, and the Chamber called Arizona's law the business death penalty and argued that it should be preempted.

Representing a generous reading of the Legal Arizona Workers Act, the Whiting Court performed an express preemption analysis and found that the Arizona law affected a business license and therefore fell within the federal Immigration Reform and Control Act's exception for "licensing and similar laws." The Court also did an implied preemption analysis of the purposes and objectives and again found no interference with federal immigration law.

Though historically deferential to the Executive Branch on matters of immigration control, in this case, the Court opposed the federal government's view, finding no obstruction to federal objectives.

Another interesting preemption case was PLIVA v. Mensing . In 2009, the Court in Wyeth v. Levine held that a common law tort claim suing for failure to warn was not preempted because the FDA requires drug manufacturers to change insufficient warning labels. The PLIVA Court refused to extend Wyeth to generics, applying an impossibility test for preemption and determining that state and federal mandates were mutually exclusive. State law says change the label, and federal law says don't change the label until the name brands do. The Court found that if there is actual conflict, courts should not attempt to harmonize it and preemption applies.

On free speech issues, the violent video game case of Brown v. EMA was a resounding 7-2 endorsement of free speech principles for private individuals. The Court declined to carve out a new free speech exception and refused to extend obscenity analysis, which measures socially redeeming value and base interest appeal. Justice Scalia's majority opinion strikingly endorsed the free speech rights of children, while Justice Thomas's dissent asserted that children don't have First Amendment rights independent of their parents.

In Arizona Free Enterprise v. Bennett, a 5-4 decision struck down Arizona's campaign finance statute, holding that its matching funds provision infringed political speech. The Arizona statute allowed matching campaign finance funds to a publicly funded state office candidate whose privately funded rival's spending reached a certain amount. The Court's decision cited an unconstitutional burden on self-financed candidates who might spend less to avoid subsidizing rival campaigns. Less spending means less speech.

Another commercial speech case, Sorrell v. IMS, involved an emerging issue called data mining, in which a pharmacy tracks and sells prescription information to data miners who use it to promote sales to doctors. The Court's 6-3 vote struck down Vermont law prohibiting this practice unless the customer consents, and held that - as a content and speaker-based speech restriction - the statute could not withstand heightened judicial scrutiny. As with state attempts to protect generics against name brand drugs, Vermont was too overt in its effort to suppress commercial speech.

Samp: Criticism of the Court as being pro-business began in 2007 with Ledbetter v. Goodyear, in which the Court's interpretation of the statute of limitations under the Title VII sharply limited damage recovery for plaintiffs claiming employment discrimination. The 2010 decision in Citizens United v. Federal Elections Commission struck down a provision of McCain-Feingold that prohibited independent political contributions by corporations and unions, and the recent decision in Wal-Mart v. Dukes, denying certification to a massive plaintiff class alleging employment discrimination, drew similar criticisms of being pro-business.

In examining the Court's 2010-2011 docket, the numbers leave one hard pressed to find pro-business bias. Of the total 75 cases, the business community had an interest in 27, with 26 results split evenly for and against it. The 27th case, General Dynamics v. United States, was a non-decision. Continued criticism of the Court may be the result of antipathy from the plaintiff's bar. Both liberal and conservative justices may have concluded that some plaintiffs' lawyers abused federal court procedural rules, resulting in decisions that reflect an effort to reduce perceived abuses.

The Court's concern about class action abuses was evident in several decisions, most prominently Wal-Mart v. Dukes, involving gender-discrimination claims by female employees. The Ninth Circuit upheld a class certification order of more than one million current and former employees, and the Court's decision to decertify may reflect its belief that plaintiff's lawyers had been bending the procedural rules to their advantage and inconsistent with the intent of FRCP 23. The Court held that the plaintiffs had not satisfied Rule 23(a), which requires issues of fact common to all 1.6 million class members, noting that Wal-Mart's hiring and promotion decisions were made at thousands of U.S. locations.

The Wal-Mart Court may have suspected that the plaintiffs' attorneys never intended to try the case, but were using class certification as a means of forcing a settlement. The Court unanimously ruled that seeking billions of dollars in back-pay and punitive damages rendered certification inappropriate under Rule 23(b)(2), which is intended for injunctive relief only. The four liberal justices would have allowed the class action to proceed for injunctive relief, but this option likely would have been unacceptable to the plaintiffs' attorneys.

In addition to AT&T, two decisions were concerned with minimizing procedural abuses: Schindler Elevator v. U.S. ex. rel. Kirk and Astra USA, Inc. v. Santa Clara County. Schindler held that the disclosure of government information pursuant to an FOIA request constitutes a report within the meaning of the False Claims Act, thereby preventing False Claims Act claims based on that FOIA-obtained information. The Court concluded that Congress did not intend to reward whistleblowers who simply use FOIA information supplied to someone else. Astra involved claims that drug companies had overcharged in violation of a complex federal drug price control law in which Congress made clear that only federal Medicare officials - not drug purchasers - were permitted to sue to enforce. Undeterred, the plaintiff sued based on a contract theory, and the Court unanimously reversed a Ninth Circuit decision allowing the suit to proceed, viewing the breach of contract action as a thinly disguised evasion of Congress's intent.

In contrast, the Court was friendlier to plaintiffs in cases involving the merits. Railroad employees were victorious in CSX Transportation v. McBride, which arose under the Federal Employers' Liability Act (FELA) - covering employment claims by injured railroad workers. Common law tort principle generally requires proof of proximate cause. The Court held that a FELA plaintiff need not demonstrate proximate cause, only that the railroad's negligence played any part in causing injury. If the Court were reflexively pro-business, it would have interpreted FELA as requiring evidentiary standards as stringent as those existing under common law.

Three civil rights/labor decisions all favored plaintiffs suing employers, as did two out of three cases involving securities law fraud. Indeed, the court ruled unanimously in Erica P. John Fund v. Halliburton that a plaintiff need not establish loss causation in order to certify a class of stock purchasers. The Court's tolerance for variety at the state level reflects adherence to federalism principles. Phillip Morris v. Jackson, for example, demonstrated more questionable class action procedure than in Wal-Mart; nonetheless, the Court recognized Louisiana state rules under the Due Process Clause and declined to review the case.